Hey guys, i was wondering if i could get some educated estimates on the total start up cost of opening a pick up delivery only pizza business (Chicago area suburbs). I am a little shaky on a solid figure as i find that ovens can very from say 1,500 to 20k and the same with freezers, Mixers not as much but lots of price variation on them too. I haven’t even looked into POS systems yet.
But what would be the bare min to just take a hole in the wall and outfit it with bare essentials to make and deliver pizzas? I figured about 15k-20k equipment, 4k signage (Store sign, neon lighting, menus, boxes) 2-3k marketing, 12k 6 months rent, and about 200-400 dollars for ingredients per day for 6 months. For an estimated start up cost of 41,700.
Labor= would be free
Is that about right, or am i over or underestimating anything?
You are missing a lot of things. I would say that 150K is a good number but it can be done for less and for more.
An equipment package of USED equipment delivered and installed including permits etc is likely to be at least 50K. Small wares several thousand more.
How about dough proofing trays for $1000?
Start up marketing expenses will be a lot more than 2-3 K 10-20K is more realistic.
Phone, insurance, wages (only free for you, not employees, and then only if you have cash put aside to live on), utilities, lease deposits, initial inventory buy and supplies etc
That can’t be right 150k? I see entire pizza businesses online for sale starting at 50k, 60k, 70k. Granted there are far more that are over 100k but those are resturant style places with seating and a large staff. But the delivery only business for 70k come with equipment, location and customer base (although it may be a crappy one). I could buy 2 of those for the price you are stating? Is there something i am missing from these cheap pizza business for sale?
Yes you are missing that these are FAILED businesses. These are operators selling equip at pennies on the dollar. You may get a good deal on equipment but you will have to make up for it in changing the perception of the location. People eat with their eyes and if they see the same type of store in the same location they will assume it is the same product (even if it has a new name). That being said it can be done but the money you save on equip. MUST be spent on marketing and changing perception of the store.
I bought my first store (closed, failed Papa John’s) for 35K. It a less than one year old buildout with all new equipment. It cost me another 15K right away in additional equipment, signs etc to get open. After that it cost about another 60K in operating losses (including start-up marketing) and two years to get profitable. That was over 10 years ago.
That location is capable of 5K in daily sales so it is a pretty high volume arrangment.
So… yes, you can buy a failed store and that is one of the cheapest ways to go. The points above about identity are very important should you take on one of these opportunities. I am living proof that it can be done. A new store is more expensive, not less.
Hi Guys: There is such a wide variation in investments that people make to open pizza shops its difficult to give an estimate.
I think the question should be how much to open a very profitable pizza shop ?
Let me make a comparison. If you were to go into the hole digging business you could do so by purchasing a shovel, or a back hoe, or a dragline. You could possibly make a living with a shovel but your ability to be profitable would increase substantially with the larger equipment.
Our experience is simply that the profitability of a pizza shop is in proportionate to the amount invested. Buy a shovel, Make a living, buy a dragline get wealthy.
We have clients putting $250,000.00 into opening shops. Almost none ever fail and most are profitable within weeks of opening.
Of course not all can handle that type of investment, but a lot of low investment operators are just buying them selves a very hard not very profitable job. You can only earn a very limited amount by the sweat of your brow.
God bless and good wishes to those who launch an enterprise with little capitol and much enthusiasm. I have seen few succeed and many fail.
You could open up for that. I opened 10 years ago buying equipment from a closed little caesars and moving into a space vacated by Dominos with a working vent hood and walk in we had to work for free for a few months before we could take a paychecks, though we made some money delivering every day. Getting ready now to open second location, vent hood is there and we have some used equipment, we plan to open for under 30k not including marketing expenses. There is always the chance of failure but if we saved up until we had a quarter million dollars to open it wouldn’t happen. I would say that most think tankers probably started in business with less than 100k in the bank, but I could be wrong.
Please note, I did not say it could not be done, only that fewer that go in lean succeed. Also I should have indicated that most all of those doings $250,000.00 shops are financing a goodly portion of that amount.
Its not that I wish to discourage ambition just that I have seen so many hart breaks of failure that I encourage caution and for many to work a few more years and save stringently so they will be better equipped and have a better chance of success when they launch their enterprise.
“But what would be the bare min to just take a hole in the wall and outfit it with
bare essentials to make and deliver pizzas?”
I too would hate to see someone lose their life savings of maybe less than 30-50k
but sometimes if you don’t take the chance you’ll never be able to do it
Starting out undercapitalized
go into it knowing that worst case scenario - you could lose everything and go into bankruptcy
more likely scenario - you’ll be buying yourself a job with long hours and low pay and high stress
and there’s a small chance scenariio - that with hard work and a little luck you could end up with a successful business
Wow, I really feel i have not figured in a great deal to start a “successful” pizza business. There seems to be a consensus that the more you spend on start up the greater the chance for success, and the faster the return. However I don’t yet understand the exact benefits of sending 250k on a delivery-pick up only vs. 50k. The cost of the equipment is a pretty standard amount (give or take a few 10’s of thousands…) but there seems to be some unknowns where large portions of capital can be consumed.
So what does a far larger investment get you vs. a low cost one? Is it just better marketing, more security (longer float to build up customer base). From my perspective there is not much advertising that can be done other that mailing and yellow pages, maybe radio. The only thing I can think of that would eat up such a large amount of money is just a longer float time, is there anyone that can break it down for me? It interests me very much to also know why a larger investment can yield a quicker return on the business.
Nooby, I doubt most pizzerias around here spent that much.
But if you are not going into a location where there was a restaurant or pizzeria then you might think again.
I am looking at a location that already was a pizzeria and looking at an oven, venting (hood, installation, roof fan), cooling (large refrigerators, refrigerated prep table) other prep tables, remodeling (moving a wall, adding some counters, countertops (alone can be a few thousand), electrician, lighting, decor, etc.) 5 sinks (3 bin + hand wash + food prep) and plumbing, seating (a few thousand for crappy booths), signage, permits, deposits, storage racks, POS system, attorney for reviewing contract, food and paper foods for startup, uniforms, marketing. I am thinking 25k, and this is on a shoe string.
A very basic-build out of a new location plus new equipment is going to run 150K+ all by itself. Doing it for high volume will cost more. That is where the 250K number mentioned in posts above is coming from. Experiencd operators are not interested in opening a hold-in-the-wall becasue there is no return in doing so. That is what you are hearing in the comments we are giving you. (The equipment package and build-out that I walked into 10 years ago for 35K cost nearly 300K to the operator that opened it)
Taking a location that has already been a restaurant and adding pizza equipment will be less due to not having to add things like vent hoods, make-up air, grease traps etc. Using good used equipment will save you some money from there.
You mentiond direct mail, radio, yellow pages as if those were insignificant expenses. Here is a break-down of what those things cost me each year: (Remember I am in a small town where rates are pretty low)
Yellow Pages: Two books, full page, cover fold-out etc $9,000
Radio: Four stations, three ads per day, various sponsorships $22,000
Direct mail: 10,000 pieces, 2 times per year, 4-color post card $4,500
On top of those things, we do in-room ads in the local hotels for another few thousand, occasional newspaper, etc etc
There is a big big difference from opening your second location for under 30K and opening your first shop especiallly with no experience. In my opinion for all you thinking of opening a shop your first one, make a copy of George Mills post, and burn it into your brain. He has explained very simply what everyone else who knows is telling you.
It’s like playing poker with 7 2 off suit against aces ; 72 wins about 12.5 times but fails 87.5 percent of the times. It’s the same with restaurants or any business for that matter.
Not sure if i am reading this correctly, but PJ there is no way 25K will get you what you detailed above even if the place if fitted with the exact same layout you plan to use (unless you are doing all the work yourself and getting all bargain basement equipment)…especially in Jersey. I would also add about another 25K to cover your expenses.
My parents started this biz about 30 yrs ago with 10K down and paid $500/week for a year to buy this run-down place…it took 3 yrs to just break even while working over 90 hrs/week…slowly built their customer base…my brothers & sisters were old enough to help and kept growing and now we are a full service restaurant doing great…My dad always said that back in the day if you worked hard that was all you needed to be successful…in today’s market that simply does not hold true…pay more and focus on LOCATION even if it takes longer…use the extra time to tweak your systems and product.
Move to Houston and just about every month you can find a pizza place, delco, for 10k-15k or less. One guy has a store that was doing 450k 4 years ago and he sold it to a guy for 175k who ran it in the ground and then he sold it to a guy for 80k who tried to run it while working full time somewhere else. Now thw current owener is behind on rent and will do anything to get out from the lease. The lease is the ticket, these guys will be on the hook for the lease unless they can get someone to take it over. So, work out a deal with the lease work a monthly payment plan with the old owner for the assets and you are in.
Another delco closed the owner wants 14k and everything is in place and working, which means they will probably take 9K. So if you have 30k to spend and you buy this place now you 20k for startup operations and marketing.
Another delco a guy bought for his son who died, the place is running and selling for 25K.
Then there are probably half a doozen places that are closed down pizza joints with most of the equipment in place that land lords let come with the space if you just come in and start paying rent.
My thought is if you buy a location that failed and you come in and change the name and then do your marketing right, when joe homeonwer gets the door hanger or mail insert he is not going to know that you used to be the old run down place so whats it matter.
First, more money can get you an “A” location. If you think the landlord of an “A” location is going to let you come in and open a hole-in-the-wall place, forget it.
Yes, more money allows more advertising. Assuming someone is opening on a shoestrings, odds are that they aren’t in a great location. That means you have to market heavily out of the location.
Yes, it allows you to last longer. I’m willing to bet that most restaurant failures are caused by under capitalization. People think they’re going to open and start making money from day one. Forget it. You probably won’t make money for two years or more, and most people run out of money to pay the bills before then.
So people open on a shoestring in a marginal location that doesn’t bring people to the doors, have no money for advertising and no working capital. Recipe for disaster.
The amazing part (not referring to you pizzanooby) is how many people fail to listen to the advice of seasoned operators that have been through all of it before.
I agree with what everyone is saying. Essentially, you can pay whatever you like and think is a good deal. However, examine what you’re doing. Any shop for sale less than $80K, probably is dead broke, and unprofitable. If you buy this dead location for $40K, you’ve just given away $40K and subjected yourself to who knows how many hours of unpaid work and potential liability. *Oh and did I mention, your $40K is gone! Usually, you’ll have to invest far more than that, both in carrying costs and free labor to turn it around. Carrying costs are important, lets just imagine that your sales are $15K/mo but it costs you $22K/mo to run your operation (without collecting a paycheck), you’re upside down $7K/mo. That additional $7K has to come from somewhere. If you do that your first 12 months, you’re now in debt an additional $84K PLUS interest. So imagine you have $40K today burning a hole in your pocket. In 12 short months, you could be burned-out, exhausted, have lost your $40K, and also about $90-$100K in debt.
This what you should consider, not that you can buy a place for a certain amount of cash.
IF you are buying a low end location your not going to be spending 22k a month carry cost. Most of the independents I see are not in A locations if they are a delco only. From doing massive door hanging, flyers gorilla marketing you can get a shop making 400-500 a day from the first week if not more.
I would guess that there are a lot of people that spent 150k to build a store that failed and sold it for asset value. I see it all the time in Houston. Desire and passion for the business will succeed over a fat bank account most of the time. While I don’t disagree that that being underfunded is not a good way to go but lacking managment skills and the desire to suceed is more important. IF you cant’ manage the labor cost, food cost it does not matter how much money you have, it will just take you longer to go broke. Please no more “we did’nt take a paycheck for 2 years” bs.